AHDB Pig Market Weekly

AHDB Pig Market Weekly - 31 July 2014

Latest AHDB/BPEX forecasts for UK pig meat supplies point to an increase in availability in the coming months. UK clean pig slaughterings in the second quarter of 2014 recorded their biggest rise in two years.

UK pig meat supplies set to increase

This suggests that productivity has improved further, with the number of pigs slaughtered per sow per year approaching 24; it was below 20 as recently as 2009. With the breeding herd thought to have stabilised and productivity continuing to improve, throughputs are expected to rise further for the rest of this year and into 2015, with growth of 3% forecast in both periods. Of late, carcase weights have fallen close to last year’s levels, which may mitigate the forecast rise in slaughterings. Therefore, growth in domestic pig meat output in the second half of this year may be only slightly higher than in the first.

Imported pig meat is also likely to remain more plentiful. In the first half of the year, there was a 5% increase in supplies from overseas and a similar rise is forecast for the second half. Despite the strong pound reducing the competitiveness of UK pork, export growth is continuing. However, any increase will be insufficient to make a big dent in the level of supplies on the domestic market. Overall, the latest forecasts suggest a 3% rise in available supplies, currently being met by subdued consumer demand, particularly for fresh pork. This means that much of the additional meat, particularly from imports, is probably finding its way into lower-value processed products or foodservice. Inevitably, this is starting to pull pig prices lower and whether this continues will depend on how demand responds once holidays are over and the weather turns colder.

Falling prices in the EU

The recent upturn in EU finished pig prices, which started in early May, has reversed in the last couple of weeks. EU pig prices fell from €175.36 per 100kg in week ended 6 July, the highest point of the year so far, to €168.43 per 100 kg in the latest week, ending 20 July. This meant pig prices came down by €7 in two weeks. The swift backward step resulted from the start of summer holidays hitting demand in Northern Europe, while the Russian ban on EU pork imports continued to weigh on the market, despite robust demand from other export markets. The falling finished pig quotations widened the annual price difference to nearly €14 per 100kg and took prices close to their level in July 2012. The latest weekly average showed UK pig prices around €30 above the EU prices, with the stronger pound contributing to this.

During the four week period ended 20 July, finished pig prices fell across the major northern EU producers. Having risen in June, German pig prices declined in the latest four weeks by around €8. The Netherlands followed a similar trend, with a €7 fall, while prices in Belgium and Denmark fell at a slower rate, by €5 and €2 respectively. In contrast, producers in Spain, Ireland and France received a higher price for their finished pigs compared with four weeks earlier. In particular, quotations in Spain rose by €4 during the four week period, widening the gap between the German and Spanish pig prices. However, it is worth noting that prices began to decline in France and Spain in the latest week.

UK pig prices

For the week ended 26 July, the GB SPP fell to 160.94p per kg. This marked a decline for the fourth consecutive week as prices fell to their lowest point since the new series began. Indeed, the EU-spec DAPP for the same week, which stood at 160.93p per kg, was the lowest since April 2013. This year, prices have shown a contrasting trend to the previous two years, when finished pig quotations in the summer months remained firm. However, falling prices are not unusual at this time of year, as demand eases during the holiday period, especially with warm temperatures suppressing demand. The latest developments in pig prices could also be partly influenced by falling prices in the EU. As such, the DAPP fell to 7p below last year’s level. Average carcase weights increased marginally on the previous week and remained slightly ahead of last year’s level, as did estimated slaughterings.

The GB APP for week ended 19 July also followed the declining trend, losing a penny to stand at 163.87p/kg. This is 2.39p more than the SPP for the same week.

The average 30kg weaner price rose in the latest week, ended 26 July, to £57.03 per head. This was almost £2 higher compared with a week earlier and the highest price recorded since early May. The large increase came despite falling finishing pig prices, indicating firm producer confidence, which might be a product of falling feed prices of late. The price in the latest week was just over £3 higher compared with the same week in 2013. The 7kg weaner market, on the other hand, edged down slightly to £39.71 per head. This was the lowest price recorded since early July 2013 but the yearly gap showed prices only around £1 below the previous year’s level for the same week.

More African Swine Fever cases in the EU

Over the last week, several new cases of African Swine Fever (ASF) have been reported from Latvia, Lithuania and Poland, the three EU countries so far infected. The most significant outbreak was in a large Danish-owned farm in Lithuania. Over 60 pigs were reported to have died from the illness and the whole herd of 19,400 pigs will now be slaughtered. The new reports also include the first case in farmed pigs in Poland and nine new cases in Latvia. While all earlier cases had been close to the border with Belarus, the new Latvian cases include some in the north of the country, near the border with Estonia.

The past week has also seen reports emerge of ASF being found in meat products from a major Russian processor. These products, which are sold in over 500 cities across Russia, do not pose any risk to human health but could spread the disease through food waste. Although 70 tonnes of products from the company have reportedly been destroyed, some contaminated products were already on sale.

At a meeting last week, the WTO established a panel to review the dispute between the EU and Russia over the latter’s restrictions on imports of pork and other pig products, imposed following the initial ASF outbreak early in the year. This follows months of unsuccessful talks between the two sides. If the panel rules in the EU’s favour, it would be allowed to impose retaliatory measures. The Russian ban continues to have a significant effect on pig prices on the continent, although this has been mitigated by strong demand from Asia.

Higher pork imports into South Korea

At 169,700 tonnes, South Korean pork imports strengthened by 7% in the first half of this year, compared with 2013, as PEDv hit its domestic production and increased demand for imports. However, the latest figures showed imports almost 50,000 tonnes below 2012 levels. While the US remained the primary supplier of pork, imports from the country were down by 3% on the year earlier, as a result of lower availability and higher pork prices following the PEDv outbreak. At the same time, imports from Canada and Chile also declined, as product was diverted to Russia, following its ban on EU pork. Therefore, Korea’s dependency the EU market increased, as imports rose by nearly 40% during the first half of the year, as there were excess pork supplies on the EU market following the Russian ban. There was a particular contribution from Germany, as imports from the country rose by 72% in the first half of the year. The value of pork imports in the first half of the year totalled ?538 billion, up 8% from a year earlier.

Pig offal imports fell by 6% in the first half of the year to 9,400 tonnes. Nonetheless, supplies were around 3,000 tonnes higher than 2012 levels. With over a half of the total supplies sourced from the EU, offal trade with the continent also weakened by 6%. In contrast, the US increased offal shipments by 6% but this failed to offset the downturn from the EU. The total value of offal imports amounted to ?26.4 billion, down 9% from the year before.

Feed market update

UK feed wheat prices continued on the downward trend this week, weakened by the good harvest reports from the EU and UK. Nov-14 UK feed wheat futures closed at £123.95/t on Tuesday, down £3.70 from the previous Tuesday and another new contract low. The latest UK harvest report by ADAS indicated that by 22 July, an estimated 10% of the UK combinable crop area had been harvested. Yields for winter barley and winter oilseed rape to date are typically better than average. US maize crops are well into the critical pollination phase and the latest fall in prices points to some ‘risk premium’ being removed from the market, as conditions to date have been favourable. Chicago maize prices have increased slightly since last week; at Tuesday’s close, Dec-14 prices reached $146.06/t, up $1.08 from last week.

Concerns over dry weather in key US soyabean growing states and strong export sales provoked a price rally over the past week. Nov-14 Chicago soyabean prices increased by $13.68 over the past week and closed at $402.30/t on Tuesday. Paris rapeseed futures also followed the upward trend, and closed at €332.75/t, up €10.50 from the previous Tuesday. UK Hi-Pro soyameal prices (Ex-store East-Coast, July delivery) were £317/t (25 July), up £7 from the previous Friday. UK rapemeal prices (34%, ex-mill Erith, August delivery) also followed the upward trend and increased by £2 to £159/t.

To read more about the latest developments in the feed market click here.

July Pig Market Trends out now

The July edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual summary of developments in the UK and EU pig markets and the global feed market over the last month, this month’s issue includes more detailed articles on:

Outlook for UK supplies. Latest AHDB/BPEX forecasts for UK pig meat supplies point to an increase in availability in the coming months, both from domestic and imported pork. This article looks at the implications of the forecasts for the UK pig market.

Northern Ireland. The number of pigs on farm in Northern Ireland in 2013 reached its highest level since 1999, around 10% of the UK herd. With imported pigs added, 16% of UK production came from NI, with around two-thirds of output exported. This article looks at developments in the industry and their impact on the GB market.

EU pig meat consumption. Demand for meat in the EU has slowed since the economic downturn in 2008 but, compared to beef and lamb, pork has performed relatively well. This article looks at data from key countries for early 2014 and what the improving economic outlook could mean for consumption levels.

EU production costs. Recent falls in feed prices will have been welcome to pig farmers, particularly those across the EU, where subdued pig prices mean that margins have remained tight. This article looks at latest figures on producer margins and what they might mean for future production.

Online meat sales. Online grocery sales will more than double in the next five years, according to IGD, but nearly half of online grocery shoppers say they prefer to buy fresh foods, such as meat, in-store rather than buying online. This article looks at what this means for the red meat industry.